Friday, November 4, 2011

Big-picture, peak job growth declining looks concerning: Chart of the Day

Whether the bad news of only 80,000 new jobs created will matter much going forward, depends on what it means for the trend. The folks at Chart of the Day have a new big-picture chart correlating the rate of job growth with stock market movements. I'm seeing three take-aways in it. First, that the rate of job growth could go positive and break above the downtrend line in that lower window as a very bullish move. But if it remains in the long-term downtrend, then it's likely to roll down again, and take the stock market down with it.

Third, that if indeed the rate of job growth does decline to a low again, then it'll have the potential when it rises to push above that long-term downtrend line. If it operates like other indicators, then it would also be very bullish if it made a higher low when the stock market makes a lower low. But that might be expecting too much. And, we'll have to see how this moves. Take a look at what Chart of the Day is showing and judge for yourself:
Chart of the Day - Peak job growth on the decline
November 4, 2011

The latest jobs report came out today with the Labor Department reporting that nonfarm payrolls (jobs) increased by 80,000 in October. Today's chart puts the latest data into perspective by comparing job growth to the S&P 500 since 1940. There are a couple points of interest... For one, the stock market has tended to rally following periods of significantly negative job growth. The last time the US economy witnessed significant negative job growth was immediately following the financial crisis. As has often been the case, the stock market followed with a sharp rally. Another point of interest is the trend in job growth since World War II. During World War II as well as during its immediate aftermath, job growth peaked only after reaching double-digit levels. From the mid-1950s to mid-1980s, job growth tended to peak in the 5 to 6% range. Since the mid-1980s, however, peak job growth has been on the decline (see red line). It is worth noting that the current level of job growth is very near its 27-year peak job growth downtrend line.

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Quote of the Day
"Nothing is particularly hard if you divide it into small jobs." - Henry Ford

Events of the Day
November 05, 2011 - Breeders' Cup
November 06, 2011 - Daylight Saving Time ends (US) - New York Marathon
November 11, 2011 - Veterans Day

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